How Banks Share Your Checking Account History
Bouncing a bunch of checks and closing a checking account while still owing money will no doubt spoil the relationship with your current bank. That's a no-brainer. What you may not realize is how easily other banks and credit unions can find out about past mistakes when you try to open new accounts.
All they need to do is look you up on a network maintained by a corporation called Chex Systems, Inc.
Following the Checking Account Trail
You've probably heard of the major US credit reporting bureaus--Equifax, Experian, and TransUnion--which collect information from financial institutions about how consumers handle credit accounts, such as car loans, mortgages, and credit cards.
ChexSystems is a consumer-reporting agency that maintains information about how consumers handle savings and checking accounts. The network is governed by the Fair Credit Reporting Act and keeps information reported by financial institutions in one central location.
When you apply for a checking account, a member bank or credit union consults the data in ChexSystems to assess the risk of doing business with you. If you've handled your accounts with aplomb, your file will be empty. Only reports of mishandled checking and savings accounts are included. Information stays on a file for five years, unless you can prove it's incorrect.
Getting a Free Report on Your Checking and Savings Account Behavior
You can get a free copy of your ChexSystems report once a year to see what, if any, information is on it by going to the ChexSystems consumer Web site. It's always a good idea to check your report if you've been turned down for a checking account to learn what information led the bank or credit union to reject your application and to see whether there are any mistakes.
You can point out any inaccurate information by submitting a dispute in writing to ChexSystems. The agency then will contact the reporting financial institutions and ask them to investigate. If the investigations find there were errors on your report, the information will be corrected immediately. You should hear back from ChexSystems after submitting your dispute within about 30 days. If the dispute remains unresolved, you can add a brief statement to your file explaining why you think the information is inaccurate.
Checking Account Fraud: What to Do
Mistakes can happen innocently, but some errors may stem from something more sinister. If you think you've been a victim of identity theft, call the police to file a report, and contact all your financial institutions, as well as the three credit reporting bureaus and ChexSystems.
Place a security alert on your ChexSystems report if you think a crook has opened fraudulent accounts in your name or taken over any of your accounts. The alert will tell financial institutions that your identity might have been compromised. They will go the extra mile to verify your identity when anyone tries to open an account in your name. The alert will stay on your report for 90 days, unless you provide a notarized affidavit for the alert to remain for five years.